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TerraClassicUSD (USTC)

TerraClassicUSD (USTC) is a USD-pegged , aiming to address the shortcomings of TerraUSD (UST). USTC builds off of the fundamentals of UST but introduces essential changes to present an upgraded version, exclusively operating on the Classic . [1]

Overview

TerraClassicUSD (USTC), formerly TerraUSD (UST), initially launched on the original in 2020, is an algorithmic stablecoin designed for resilience and stability. USTC aims to become stable by diversifying its asset backing as UST lacked real dollar reserves and relied on complex algorithmic mechanisms involving token burning and . USTC resides on the Terra Classic blockchain, distinguishing it from UST which is associated with the original Terra blockchain. USTC has gained support from platforms like and , making it accessible to users. [1][2]

History

Terra Classic, the original Terra blockchain version, launched in April 2019 by Labs (founded by and ), aimed to create a global payment system supported by fiat- stablecoins secured by , a floating-rate . Terra Classic employed for the minting and burning of various stablecoins in response to supply and demand fluctuations. LUNC served as collateral and a , stabilizing the price of these stablecoins. The Terra Classic network also supported using USTC as a benchmark or medium of exchange. [3][4]

May 2022 Collapse

In May 2022, Terra Classic experienced a significant collapse when UST lost its peg to the US dollar. A substantial sell-off on major exchanges, triggered by a market crash and liquidity crisis, caused UST's devaluation. This initiated a detrimental feedback loop, compelling the protocol to mint trillions of tokens to buy back UST, resulting in hyperinflation and LUNC devaluation. Legal issues led to the arrest of co-founder , while avoided arrest in South Korea. [5][6][8]

UST Becomes USTC

When TerraUSD (UST) lost its USD peg, dropping to $0.68, this prompted a wave of UST liquidity withdrawals from the Anchor Protocol, followed by LUNA minting in an attempt to regain stability. However, these efforts led to hyperinflation, causing a severe devaluation of UST. To revive the project, co-founders initiated a community-led effort, culminating in the creation of a new blockchain, Terra Classic, and the rebranding of TerraUSD (UST) into TerraClassicUSD (USTC). This transition marked Terra 2.0's inception, focusing on and community ownership, omitting algorithmic stablecoins, and adopting Terra (LUNA) as the sole cryptocurrency. [2][7]

Ceasing the Minting Process

On September 21, 2023, Terra Classic ceased TerraUSD (USTC), following a community vote that garnered 59% approval. TerraUSD's debacle caused a 99.9% drop in LUNA token prices and significant losses in Terra-based apps. The community's decision to halt minting is aimed at safeguarding users and external investors who are burning USTC to restore its peg. [9][10]
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TerraClassicUSD (USTC)

Commit Info

Edited By

0xa817e9da10923C49C3eD3265Ec9aAb4FB2AF69FE
Yeonwoo

Edited On

December 21, 2023

Reason for edit:

made neutral

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